INTRODUCTION
Background
Employee retention is crucial for achieving an organization's goals and objectives, serving as a significant source of competitive advantage In today's landscape, factors such as technological advancements and global economic crises are impacting the dynamics between employees and employers.
High-performing employees may depart from a company due to dissatisfaction, inadequate compensation, or lack of motivation (Coff, 1996) Additionally, asymmetric information regarding employee performance can hinder an organization's ability to retain its most productive workers Without clear insights into employee performance, it becomes challenging for organizations to differentiate between high and low performers.
Insufficient information about employee performance can lead to adverse selection, where high-performing employees leave for better opportunities while less productive workers remain This issue arises when management fails to differentiate between talented and non-talented employees, resulting in similar compensation packages for both groups Additionally, the challenge of retaining skilled workers is exacerbated by bounded rationality High turnover rates increase training and recruitment costs, as new hires lack experience and require significant time and resources to train Furthermore, high turnover negatively impacts the morale of remaining employees.
Problem statement
In 2013, the Vietnamese government focused on controlling inflation and stabilizing the macro economy, which posed challenges for the banking sector in achieving credit growth and profit targets The State Bank of Vietnam reported that the total revenue of the banking industry in 2012 was 28,600 billion dong, reflecting a 50% decrease compared to 2011 (InfoTV).
In 2012, the annual reports of Vietinbank, Vietcombank, Eximbank, and Seabank revealed a decline in employee salaries compared to 2011 Banking finance expert Nguyen Tri Hieu noted that the average salary in the banking sector was on par with other sectors during that year.
Employees in the banking sector experience significant work pressure, leaving them with little time for personal life and family, coupled with relatively low salaries, which contributes to a high turnover rate A 2012 survey by Towers Watson indicated that the banking sector had the highest turnover rate at 16% compared to other industries Additionally, interviews with human resources managers at Vietinbank revealed an average voluntary turnover rate of 7.3% during 2012 and the first half of 2013.
Table 1: The turnover rate of Vietinbank in 2012-2013( Source: Human resources managers of Vietinbank)
Vietinbank’s Branch Turnover rate of 2012 Turnover rate of first six month in 2013
In challenging times, banks aim to retain skilled and experienced employees to achieve their business objectives It is essential to explore the factors affecting employee retention rates and develop effective human resource strategies to maintain top talent in the banking industry.
Employee retention is a key focus for bank leaders, who have adopted strategies like salary increases, skill training, and promotion opportunities to enhance retention rates Despite these efforts, turnover remains high Understanding the motivating factors and the relationship dynamics that impact employee retention is crucial for addressing this challenge.
Previous studies have identified several motivational factors influencing retention, including basic needs such as hunger, thirst, shelter, safety, social connections, and esteem (Maslow, 1954) Additionally, factors like achievements, recognition, the nature of work, responsibility, opportunities for advancement, and personal growth have been highlighted (Herzberg, 1959) This raises the question: what specific factors are related to employee retention in the banking industry?
This study aims to identify the key motivational factors influencing employee retention in the banking industry It seeks to offer innovative solutions and evidence for effective human resource management practices.
Research Objectives
This research aimed at clarifying the impact of motivator factors to the employee retention in the banking industry in Vietnam with the specific objectives:
To identify the impact of motivation factors (in Herzberg‘s two factor theory) on employee retention in banking industry in Vietnam
To measure the impact level of these factors on employee retention in banking industry in Vietnam
To examine the differences the impact of motivation factors on employee retention among groups of working duration, and the level of intention between manager and staff.
Research scope
Given the limited resources and time, the empirical data for the research were collected from commercial banks in Binh Duong province They are Vietinbank, EximBank and Vietcombank
The respondents are 300 employees from those banks.
Thesis structure
Chapter 1: Introduction presents the research background, problem statements, research objectives, and research scope and thesis structure
Chapter 2: Literature review presents literature review, research model and hypotheses
Chapter 3: Research methodology illustrates the methodology of this paper
Chapter 4: Data analysis and findings presents research results based on collected data
Chapter 5: Discussion, conclusion and recommendations summarizes the research results, provide the findings and recommendations tot nghiep down load thyj uyi pl aluan van full moi nhat z z vbhtj mk gmail.com Luan van retey thac si cdeg jg hg
LITERATURE REVIEW
Predictors of employee retention
Employee retention focuses on implementing strategies to minimize avoidable employee turnover It is essential for organizations to keep employees who possess the necessary skills and experience to sustain business operations effectively.
When employees depart from an organization, it results in the loss of valuable knowledge regarding production, ongoing projects, competitors, and loyal customers Various factors influence employees' decisions to remain with a company, and understanding these factors is crucial for retention To effectively keep employees engaged, organizations must identify what motivates them and regularly assess their job satisfaction.
Cappelli (2000) identified key factors influencing employee retention, including career opportunities, work environment, work-life balance, organizational justice, and leave policies Similarly, Cole (2000) found that employees are more likely to remain with organizations that value their contributions and allow them to perform at their best The primary reasons for employee retention include a robust reward system, opportunities for growth and development, competitive pay packages, and a healthy work-life balance.
There are some of the more famous theories within this motivation category: Maslows‘
Hierarchy of Needs Theory (1954) , and Herzberg‘s Two-Factor Theory (1959)
Maslow's Hierarchy of Needs Theory, developed by Abraham Maslow, is a prominent motivational framework that outlines five levels of needs individuals strive to fulfill These needs begin with physiological essentials such as hunger, thirst, and shelter, and progress through safety, social, and esteem needs, culminating in self-actualization Self-actualization represents the pursuit of one's maximum personal potential The pyramid structure of the theory illustrates that certain needs take precedence over others, necessitating their fulfillment before higher-level needs can act as motivators.
Herzberg's Two-Factor Theory categorizes job satisfaction and motivation into two distinct groups: motivation factors and hygiene factors Motivation factors include achievement, recognition, the nature of the work, responsibility, opportunities for advancement, and personal growth In contrast, hygiene factors encompass company policies, supervision quality, relationships with supervisors and peers, working conditions, salary, personal life, status, and job security.
Table 2: Maslow vs Hertzberg - Comparative Analysis:
Maslow's theory is based on the concept of human needs and their satisfaction
Hertzberg's theory is based on the use of motivators which include achievement, recognition and opportunity for growth
Basic of the theory tot nghiep down load thyj uyi pl aluan van full moi nhat z z vbhtj mk gmail.com Luan van retey thac si cdeg jg hg
According to Maslow's model, any needs can act as motivator provided it is not satisfied or relatively less satisfied
In the dual factor model of Hertzberg, hygiene factors (lower level needs) do not act as motivators Only the higher order needs (achievement, recognition, challenging work) act as motivators
(Comparative Analysis between Maslow vs Hertzberg (Source: Akrani, 2011)
A job enrichment program initiated by Herzberg at Hill Air Force Base in Utah demonstrated that enriched jobs lead to a reduction in personnel turnover and decreased overtime.
Maslow's theory is based on the hierarchy of human needs He identified five sets of human needs and their satisfaction in motivating employees
Hertzberg refers to hygiene factors and motivating factors in his theory Hygiene factors are dissatisfies while motivating factors motivate subordinates Hierarchical arrangement of needs is not given
Maslow's theory is rather simple and descriptive The theory is based long experience about human needs
Hertzberg's theory is prescriptive, highlighting effective motivating factors derived from empirical data This theory is grounded in insights gathered from interviews with 200 engineers and accountants.
Maslow's theory of motivation is highly recognized and frequently referenced, demonstrating its broad relevance It is particularly applicable in impoverished and developing nations, where financial incentives remain a significant driving force.
Herzberg's theory is an extension of Maslow's theory of motivation Its applicability is narrow It is applicable to rich and developed countries where money is less important motivating factor
Maslow's theory or model is descriptive in nature
Herzberg's theory is prescriptive, focusing on factors that influence job satisfaction and motivation It emphasizes the importance of reducing man-hours and achieving material savings to enhance productivity and employee engagement.
Table 2 : The result of job enrichment program by Herzberg 1976
Motivation factors Reported increase prior to enrichment (%)
Source: Adapted from Herzberg and Zautra (1976)
Mausner and Snyderman (1999) identify organization-based motivational variables that influence employee job satisfaction, which is a key predictor of retention and turnover Their theory distinguishes between satisfaction and dissatisfaction, attributing them to different factors: motivators and hygiene factors Motivators are the elements of a job that encourage employees to perform well and influence their decision to remain with or leave an organization.
Job satisfaction is very important in organization, dissatisfaction often leads to lethargy and reduced organizational commitment Lack of job satisfaction is a predictor of quitting a job
(Alexander, Litchtenstein, and Hellmann, 1998) If any employee is not being motivated by the factors, quitting tendency is observed (Bolarin, 1993)
Correlation exists between perceived work motivation, job satisfaction, and employee retention Research indicates that increased motivation enhances job satisfaction among workers Additionally, studies have shown a significant relationship between job satisfaction and employee turnover, highlighting the importance of these factors in organizational dynamics.
Riger and Sullivan (1995) found a strong connection between motivation and job satisfaction, which significantly influences employees' intention to remain with a company When employees experience high job satisfaction, it fosters greater motivation, ultimately leading to reduced turnover rates (Abraham).
Ando and Hinkle, 1998; Mael and Ashforth, 1995; Ellemers, Spears and Doosje, 1997; Wan-
Research indicates a significant relationship between motivation and employee retention While previous studies have primarily concentrated on hygiene factors—such as company policies, supervision, peer relationships, work conditions, salary, personal life, status, and job security—this study aims to explore the impact of motivator factors Key motivators like advancement, responsibility, and recognition will be examined to assess their influence on employee retention.
Achievement, and Growth) of Herzberg‘s theory to answer this problem in banking industry in Vietnam.
Motivators of Employee retention
Base on Herzberg‘s theory, there are five main motivators as follows:
This refers to the expected or unexpected possibility of promotion An example of negative advancement would be if an employee did not receive an expected promotion or demotion
Oosthuizen (2001) identified advancement as a significant motivator, highlighting its role in fostering personal growth, enhancing responsibility, and improving social standing Arnolds and Boshoff (2001) further emphasized that providing more promotion opportunities can lead to higher employee job performance This discussion underscores the strong relationship between advancement and employee retention, leading to the hypothesis that promoting advancement can positively impact retention rates.
H1: There is a positive significant impact of advancement on employee retention
Employee autonomy in decision-making fosters a sense of responsibility and encourages innovation, leading to increased motivation and job satisfaction When managers trust their employees' decisions and support their creative ideas, it enhances employees' confidence and effectiveness in their roles This relationship highlights the importance of responsibility as a key motivator in effective management practices.
H2: There is a positive significant impact of responsibility on employee retention
Recognizing employees for their achievements significantly boosts their job satisfaction, while neglect or criticism can lead to dissatisfaction According to a 2002 Watson Wyatt survey in the USA, employees value acknowledgment from their organizations, as it reinforces their sense of worth and appreciation for their contributions.
Previous studies have indicated that recognition plays a significant role in enhancing employee retention.
(Allen, Shore & Griffeth 2003; Bergiel et al 2009) Therefore, the hypothesis is:
H3: There is a positive significant impact of recognition on employee retention
A positive achievement occurs when an employee finishes a task or project ahead of schedule and receives excellent feedback on their work This accomplishment not only boosts the employee's satisfaction but also reflects positively on the bank's performance and remuneration.
(salary, benefits, and incentive) Employees‘ motivation will enhance by monetary and non- monetary reward and incentives (Bergiel, Nguyen, Clenney & Taylor 2009; Dockel 2003)
Bergiel (2009) suggested that there is a significant and positive relationship between compensation and job embeddedness Thus, hypothesis is:
H4: There is a positive significant impact of achievement on employee retention
Opportunities for advancement and skill development are key motivational factors for employees When growth potential is limited or employees encounter a glass ceiling, their job satisfaction may decline significantly.
The sufficient training opportunities to employees and training program should be an important plan for employee growth and development (Dockel 2003; Kraimer, Seibert,
According to Storey and Sisson (1993), training and promotion are key methods through which employers demonstrate their commitment to employees Research by Frazis et al (1998) and Wetland (2003) indicates that these practices can significantly enhance employee retention Therefore, the hypothesis is established.
H5: There is a positive significant impact of growth on employee retention.
Model and Hypothesis
According to hypotheses that stated above, the proposed research model was shown below:
Hypothesis 1: There is a positive significant impact of Advancement on employee retention
Hypothesis 2: There is a positive significant impact of Responsibility on employee retention
Hypothesis 3: There is a positive significant impact of Recognition on employee retention
Hypothesis 4: There is a positive significant impact of Achievement on employee retention
Hypothesis 5: There is a positive significant impact of Growth on employee retention
Employee Retention tot nghiep down load thyj uyi pl aluan van full moi nhat z z vbhtj mk gmail.com Luan van retey thac si cdeg jg hg
Chapter summary
This chapter explores employee retention by examining various motivational theories and referencing previous research to support the findings It highlights key motivator factors and proposes a model for employee retention based on the literature review.
Data collection, data analysis and hypothesis testing Hypothesis testing
RESEARCH METHODOLOGY
Research design
The research procedure is depicted in Figure 2:
Figure 2: Research procedure tot nghiep down load thyj uyi pl aluan van full moi nhat z z vbhtj mk gmail.com Luan van retey thac si cdeg jg hg
Research methodology
Sample size depends on analytical methods, this study has used Exploratory Factor Analysis
According to Hoang and Chu (2005), the recommended sample size for a study should be five times the number of observed variables, leading to a minimum of 150 observations for 30 variables Similarly, Hair et al (1998), as cited in Nguyen (2011), emphasize a 5:1 ratio of observed variables to measured variables, indicating that each measured variable should have at least five observed variables Additionally, Tabachnick and Fidell provide further insights into this sampling methodology.
(1991) cited in Nguyen (2011), suggested that regression analysis to achieve best results, the sample size to satisfy the formula: n ≥ 8k + 50 (3.1)
( n is the sample size and k is the number of independent variables of the model)
This research conducted with sample sizes of about 228 is considered appropriate
Sampling method of this study was convenience sampling method; the object is officer employees in banks in Binh Duong provinces
This study collected data from approximately 300 bank employees in Binh Duong province.
Participants in this study are classified as employees, supervisor and head / deputy department
The response rate for the study was 83%, equating to 250 completed questionnaires After filtering, several questionnaires were discarded due to missing values, resulting in a final sample size of 228 questionnaires This data will be utilized for subsequent analysis.
Statistical analyses were conducted using the Statistical Package for the Social Sciences (SPSS) version 20.0, employing both descriptive and inferential statistics, including Cronbach's alpha, exploratory factor analysis (EFA), correlation, and multiple regression analysis The analysis process was systematically implemented to ensure accurate results.
To ensure the reliability, unidimensionality, and validity of the developed multi-item scale, it is essential to conduct thorough testing The most widely used method for assessing reliability is Cronbach's alpha, which indicates a high correlation among scale items (Hair et al., 1998) Before performing reliability tests, it is crucial to establish unidimensionality, defined as the presence of a single underlying construct for a set of items (Garver and Mentzer, 1999) This step is necessary because reliability measures like Cronbach's alpha assume unidimensionality but do not confirm it (Hair et al., 1998).
In this research, Step 2 involves assessing the convergence of variables in the model through exploratory factor analysis (EFA) The primary methods for extracting factors in EFA are common factor analysis and principal component factor analysis.
EFA with principal component, eigenvalue >= 1 and varimax rotation was applied to
This study, based on the work of Conway and Huffcutt (2003), examines six constructs to determine if each scale is unidimensional or multidimensional For a scale to be considered empirically unidimensional, factor analysis should yield a single extracted factor Additionally, items with a factor loading below 0.40 are removed, as they do not adequately align with the latent construct they aim to measure.
(Hair et al., 1998) tot nghiep down load thyj uyi pl aluan van full moi nhat z z vbhtj mk gmail.com Luan van retey thac si cdeg jg hg
In Step 3, we analyze the linear regression to assess how independent variables influence the dependent variable This involves evaluating the model's suitability, constructing multiple regression models, and testing relevant hypotheses.
Measuring instrument
Responses are scored on a five-point scale ranging from 1 for ―strongly disagree‖, 2 for
―disagree‖, 3 for ―neutral‖, 4 for ―agree‖, and 5 for ―strongly agree‖
Adv01 The opportunities for advancement on this job
Weiss, Dawis, England, and Lofquiest (1967), Sungmin Hyun (2009).
Adv02 The chances of getting ahead on this job
Adv03 The way promotions are given out on this job
Adv04 The chances for advancement on this job
Res05 The chance to be responsible for planning my work
Weiss, Dawis, England, and Lofquiest (1967), Sungmin Hyun (2009)
Res06 The chance to make decisions on my own Res07 The chance to to responsible for the work of others Res08 The freedom to use my own judgment
Res09 The responsibility of my job
Rec10 The way I am noticed when I do a good job
Weiss, Dawis, England, and Lofquiest (1967), Sungmin Hyun (2009)
I receive full credit for my work through consistent recognition and feedback When I perform my job well, I am often informed about it, and I appreciate the praise I receive for my accomplishments.
Achievement tot nghiep down load thyj uyi pl aluan van full moi nhat z z vbhtj mk gmail.com Luan van retey thac si cdeg jg hg
Ach15 Being able to see the result of the work I do
Weiss, Dawis, England, and Lofquiest (1967), Sungmin Hyun (2009)
Taking pride in a job well done is essential, as it reflects the value of doing something worthwhile It provides the opportunity to consistently perform at my best, leading to a profound sense of accomplishment that comes from my work.
Gro20 I am proud to work in my company because I feel I have grown as a person
Teck Hong Tan and Amna Waheed (2011)
Gro21 My job allows me to grow and develop as a person
Gro22 My job allows me to improve my experience, skills and performance
Ret23 I‘m planning on working for another company within a period of three years
Filip Dochy, Maya Michielsen, Bastiaan Moeyaert (2009)
Ret24 Within this company my work gives me satisfaction
Ret25 If I wanted to do another job or function, I would look first at the possibilities within this company
Ret26 I see a future for myself within this company
Ret27 If it were up to me, I will definitely be working for this company for the next five years
Ret28 If I received an attractive job offer from another company, I would take the job
Ret29 The work I‘m doing is very important to me
I enjoy my experience working for this company, and I appreciate the opportunities it provides.
Chapter summary
This chapter details the research design, sample characteristics, data collection methods, measurement instruments, and statistical techniques employed to test the research hypotheses.
DATA ANALYSIS AND FINDINGS
Sample characteristics
Data for this study were collected from 250 questionnaires distributed through banks in Binh Duong province After filtering, several questionnaires were excluded due to missing responses, resulting in a final sample size of 228 completed questionnaires.
The following sections describe the main characteristics of the sample.
There are 31.6 % or 72 male respondents and 68.4% or 156 female respondents These percentages reflect the ratio of female in the banking industry is 2/3
Table 3 : Descriptive Statistics by gender
Frequency Percent Valid Percent Cumulative
Base on the data, age of employees can divide in to four groups:
1 Less than 25 year old: There were 48.7% or 111 people are under 25 years old They are new employees in the company tot nghiep down load thyj uyi pl aluan van full moi nhat z z vbhtj mk gmail.com Luan van retey thac si cdeg jg hg
2 Between 25 and 35 year old: there were 31.1% or 71 people They are senior employees in the company They have experience in banking industry
3 Between 36 and 45: There were 9.2% or 21 people They are supervisors
4 Greater than 45: There were 11% or 25 people, they may be the managers of the banks
Table 4: Descriptive Statistics by age
Frequency Percent Valid Percent Cumulative
According to survey results, company employees account for 80.3% (n3) and the remaining
19.7% respondents was manager/supervisor (nE) This structure shows that the banks focus on supervision on their transaction
Table 5: Descriptive Statistics by working position
Frequency Percent Valid Percent Cumulative Percent Valid
Assessment of measurement scales
The process of assessment and refinement of measurement scale are implemented using SPSS
20.0 software EFA and Cronbach alpha were used to assess unidimentionality and reliability tot nghiep down load thyj uyi pl aluan van full moi nhat z z vbhtj mk gmail.com Luan van retey thac si cdeg jg hg
The criteria of refinement of item included factor loading > 0.40, item-total correlation > 0.3,
Cronbach alpha > 0.60, % of variance (Hair et al., 1998)
Before utilizing Exploratory Factor Analysis (EFA), research data will undergo testing with Cronbach's Alpha to assess the reliability of the scale components related to employee retention The testing results indicate that the variable components used to measure employee retention are based on the Corrected Item-Total Correlation.
Particularly, two items of retention have Corrected Item-Total Correlation < 0.3 (Corrected
Item-Total Correlation = 0.015 and -.007) and, so they are eliminated (Corrected Item-Total
Table 6: Cronbach's Alpha test results
This job offers significant opportunities for advancement, with a strong likelihood of getting ahead Promotions are awarded based on a clear process, ensuring that employees have a fair chance for career growth Overall, the chances for advancement in this role are promising.
The opportunity to take charge of my work planning is significant, with a score of 0.807 Additionally, having the autonomy to make independent decisions is valued at 0.730 Furthermore, the responsibility for overseeing the work of others is also an important aspect, reflected by a score of 0.688.
Res08 The freedom to use my own judgment .700
Res09 The responsibility of my job .690
I appreciate being recognized for my efforts, as it significantly impacts my motivation Receiving full credit for my work is essential, and I value the acknowledgment I receive for my contributions It's encouraging when my performance is praised, and I find it rewarding when feedback is provided, highlighting my successes in the workplace.
Ach15 Being able to see the result of the work I do 703 Ach16 Being able to take pride in a job well done
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Ach18 The chance to do my best at all times 814 Ach19 The feeling of accomplishment I get from the job 811
Gro20 I am proud to work in my company because I feel I have grown as a person .815
Gro21 My job allows me to grow and develop as a person .830
Gro22 My job allows me to improve my experience, skills and performance .733
Ret23 I‘m planning on working for another company within a period of three years .015
Ret24 Within this company my work gives me satisfaction .761
Ret25 If I wanted to do another job or function, I would look first at the possibilities within this company .655 Ret26 I see a future for myself within this company .667
Ret27 If it were up to me, I will definitely be working for this company for the next five years .657
Ret28 If I received an attractive job offer from another company, I would take the job -.007
Ret29 The work I‘m doing is very important to me .654
Ret30 I love working for this company .731
Ret24 Within this company my work gives me satisfaction .825
Ret25 If I wanted to do another job or function, I would look first at the possibilities within this company
.733 Ret26 I see a future for myself within this company .796
Ret27 If it were up to me, I will definitely be working for this company for the next five years
Ret29 The work I‘m doing is very important to me .722
I love working for this company, and I appreciate the opportunities it provides The latest updates and resources are easily accessible, making it convenient for employees to stay informed and engaged.
4.2.2.1 EFA for all scale of antecedent factors
In this procedure, Item loaded highly on more than two factors were eliminated, loading of items smaller threshold value of 0.40 are eliminated, % of variance > 50% and eigenvalue > 1;
KMO (Kaiser-Meyer-Olkin) is between 0.5 and 1 (0.5